The Federal Reserve has launched a 60-day comment period to permanently remove the subjective “reputational risk” standard from its bank supervision rules. Lawmakers and crypto advocates say this move curbs informal pressure on banks serving digital asset firms, a practice termed “Operation Choke Point 2.0.” While seen as a corrective step, policy experts argue clear legislation is still needed to provide durable rules for crypto banking access.
The Federal Reserve has opened a two-month comment period on a proposal to permanently codify the removal of “reputational risk” from its bank supervision rules. This is the most binding step yet in a regulatory rollback that crypto advocates say ends informal pressure on banks serving digital asset firms.
The move follows an announcement last year that the term would no longer factor into bank supervision, replaced with a focus on “material financial risks.” In a statement, Vice Chair for Supervision Michelle Bowman said the vague standard had “introduced unnecessary variability into supervisory approaches.”
Senator Cynthia Lummis (R-WY), who last year displayed the Fed’s supervisory handbook to show how reputational risk was used against crypto firms, said the proposal is long overdue. “It’s not the Fed’s role to play both judge and jury for banking digital asset companies,” she posted on X.
Sudhakar Lakshmanaraja, founder of policy body Digital South Trust, told reporters the proposal was a necessary corrective but cautioned that informal pressure was never the whole picture. He said Congress should settle the issue through clear crypto market structure and stablecoin legislation.
The comment period announcement comes days after JP Morgan Chase acknowledged it closed President Donald Trump’s accounts after the January 6, 2021, attack on the U.S. Capitol, according to a report. Trump is suing the bank for $5 billion over the allegedly politically motivated closures.
Last August, Trump signed an executive order directing federal banking regulators to adopt policies preventing “politicized or unlawful debanking.” Earlier this month, the FDIC settled a separate FOIA lawsuit brought at Coinbase‘s direction, agreeing to pay $188,440 in legal fees after a court found the agency had violated transparency laws. The Fed’s public comment window closes within 60 days, after which a final rule is expected.
